SC disposes ONGC-Gujarat govt royalty payment case

New Delhi, Feb. 20 -- The Supreme Court on Monday disposed of a case relating to royalty payment of Rs10,000 crore for onshore drilling by Oil and Natural Gas Corp. Ltd (ONGC) and the Gujarat government as the parties reached a settlement.
The court's decision came after the central government told the court that according to an agreement reached between the ministry of petroleum and natural gas, the Gujarat government and ONGC, the Centre would pay the state government.
"The settlement is legal and since ONGC is a public sector undertaking, we have taken this decision," the central government law officer, additional solicitor general Tushar Mehta, told the court.
A bench headed by justice J. Chelameswar also recorded the state government's nod for the settlement agreement.
In 2013, the Gujarat high court had directed ONGC to pay royalty to the state on the gross bill price of crude oil. The company, as per a government of India directive, pays royalty on the net or actual price realized from refiners after allowing for fuel subsidy discounts.
As of now, ONGC has paid part of its current dues to the Gujarat government as the apex court had earlier directed it to pay royalty at pre-discount rate (in comparison to market rate) from 1 February, 2014.
Although in the current instance the Centre intervened, state-owned oil producers Oil India Ltd and ONGC paid a total of Rs1,450 crore to the Assam government as royalty dues on crude oil mined in the state in August 2016.
Both Assam and Gujarat had claimed that the royalty computed on the basis of the pre-discount price had impacted revenues.
"A memorandum of understanding has been reached towards resolving the royalty issue," ONGC director (finance) A.K.Srinivasan said over the telephone. "Upstream companies like ONGC and Oil India Ltd., refiners like Indian Oil Corp. and the central government earlier used to subsidise petrol and diesel under a burden-sharing arrangement."
In October 2015, the government fully deregularised diesel prices.